As of 1 March 2013 it's easier. You simply calculate the tax on the actual cost you pay the rental company each month.
There are four easy steps you can follow to tax your employees correctly. Let's have a look…
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Four steps to calculate the fringe benefit for rented company cars
Step # 1
– Determine how much your employee uses the car for business purposes. If your employee can prove 80% of his travel is for business, you'll deduct PAYE on 20% of the value. If business travel is less than 80% of the total distance per month, then you have to deduct PAYE on 80% of the value.
Step # 2
- Calculate the value of the fringe benefit. This is the actual cost the company pays to rent the vehicle, plus any fuel paid by the company.
Read on for the other two steps.
12 Taxable fringe benefits - are you taking advantage of all of them?
There are hundreds of companies out there that don't know which fringe benefits are taxable or they land up taxing the wrong percentage on them...
This kind of error could cost you thousands in penalties to SARS if it catches you out – and it will!
Find out how to make sure every time you offer a fringe benefit to your employees you'll know if it's taxable or not and how to tax it correctly.
Four easy steps to tax your employees correctly when they use a company rented vehicle cont.
Step # 3
- Calculate the employees' tax (i.e. PAYE) on this fringe benefit. You'll use 80% (previously 100%) of the fringe benefit value if the monthly distance travelled is less than 80% for business purposes, or 20% if the monthly distance travelled is more than 80% for business purposes.
Step # 4
- Deduct the PAYE from the employee's monthly salary.
If you follow these four steps, you won't spend another minute getting your calculations wrong again.
Until next time,
Managing Editor: Practical Tax Loose Leaf service
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